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Core sector growth slows to 4.3% in May, experts call it high base effect

Core sector growth slows to 4.3% in May, experts call it high base effect
  • The core sector growth was 19.3% in May 2022 while in April 2023 the key infra sectors recorded a growth rate of 4.3%.
  • Electricity production declined marginally due to the high base effect of 23.5% growth last year, which was unusually hot.
  • Fertilizer production was up by 9.7% and will continue to remain robust for the next two months to keep pace with the kharif sowing requirements, say economists at Bank of Baroda.
The growth of eight key infrastructure sectors slowed down to 4.3 per cent in May 2023 due to a decline in the production of crude oil, natural gas, and electricity.

The core sector growth was 19.3% in May 2022 while in April 2023 the key infra sectors recorded a growth rate of 4.3%.

During April-May this fiscal, the output growth of these eight sectors slowed down to 4.3 per cent as against 14.3 per cent in the year-ago period.

“Core sector growth for May came in at 4.3% which is quite impressive considering that last year growth was 19.3%,” said Madan Sabnavis, chief economist at Bank of Baroda.

Crude oil production declined by 1.9% in May 2023 while natural gas production declined by 0.3%. Petroleum refinery production increased by 2.8%.

“The oil basket however continued to disappoint with negative growth for crude and natural gas. Lower global crude prices normally are associated with lower domestic production. Refinery products did relatively better with 2.8% growth with exports also contributing to the same,” Sabnavis said.

Coal growth was 7.2%, and that can be attributed to higher steel production. Electricity production declined marginally by 0.3% mainly due to the high base effect of 23.5% growth last year.

“It was otherwise a very hot month where demand had gone up as demand for cooling increased,” said Sabnavis.

Fertilizer production was up by 9.7% and will continue to remain robust for the next two months to keep pace with the kharif sowing requirements, he adds, saying that they expect IIP growth to be in the region of 3-3.5% for May.

Steel production increased by 9.2%, while cement production increased by 15.5%.

(With PTI inputs)

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